Any savvy entrepreneur knows the importance of the profit / loss statement (the P&L). The P&L is basically a breakdown of all your expenses (fixed and variable) and all of your income, showing you the difference between the two. Hopefully, you’re “in the black,” meaning your profitable with your income being greater than your expenses.
This is a vital business metric that all entrepreneurs should watch and study. I look at mine at least ten times a day. I can recite it by heart.
Above is an example of a well put together P&L. The numbers seem a bit inflated, but all I can say is…damn…wish I owned THIS business…
In today’s economic environment, when consumer spending is at an all time low, smart entrepreneurs are beginning to focus more and more inward on their businesses since the task of gaining new sales is becoming increasingly difficult. Leaning down a business’ spending is a huge challenge but can be very rewarding in the end. It takes creativity and sacrifice.
- How: Quickbooks is a popular accounting program that can help you track your finances. I use it religiously in my personal and business endeavors. I recommend it to everyone I know. It’s simple, it’s quick and it’s organized.
- Why: Any entrepreneur who doesn’t track what they spend on labor, raw materials, marketing, utilities, etc. should be backhand slapped in the face. Far too many business owners care more about what’s coming in than what’s going out. I call it check writing in autopilot.
- Example: Every week I have a company that washes our uniforms, aprons, napkins and towels for my restaurant. It was an expense I hated, and it was growing. I was paying out over $3,000 a month for laundry! Every time I looked at my P&L, I got pissed. Not upset…pissed. So what did I do? I went on Craigslist, bought a stackable washer/dryer for $500, bought some industrial detergent and instructed the employees in the back to throw the dirty linens in at the end of each day. By making that move, I now spend $100 a month on laundry. Do the math. That’s a huge savings, and I would have never known it if I hadn’t seen it on my P&L.
For all those that just scan articles to the end…I’m putting this in bold…If you don’t have a profit and loss statement, you don’t have an understanding of your business and you don’t have a chance in hell of making it.